LONDON/NEW YORK, The battered advertising industry is expected to show the first signs of a recovery next year after one of its worst years ever in 2001, but the comeback will be slow, two leading forecasters said on Monday.
Zenith Optimedia said in its latest report that it expected an upturn in global advertising spending to gather pace by the fourth quarter of next year, but 2002 will still show a decline of around 1.3 percent after a 5.8 percent tumble this year.
Meanwhile, Universal McCann's forecasting guru Robert Coen said he expected ad spending in the United States to turn positive in 2002 but at a modest 2.4 percent, to $239.3 billion, after a 4.1 percent fall this year.
Advertising spending is one of the first things to go when companies hit bad times, and advertisers have been slashing their budgets this year in an economic downturn made worse by the September 11 attacks in the United States.
While economic downturns are exaggerated in the advertising industry, so are the upswings, and the big question among forecasters now is when a recovery will begin.
"We agree that a recovery is expected by the fourth quarter next year but both forecasters' figures (still) appear optimistic," said Tom Deitz, analyst at Merrill Lynch in London, referring to Zenith and Universal McCann's latest forecasts.
Global advertising stocks softened on Monday, partly on the prospect of a slow rebound and after advertising group Cordiant (CRI) issued its third profit warning in four months. Industry giant Interpublic Group of Cos (IPG) saw its shares fall 2.2 percent while WPP Group (WPP) shares lost two percent.
Speaking at the UBS Warburg media conference in New York, London-based Zenith conceded that the advertising slowdown had been sharper than in previous advertising recessions.
The U.S. market has been hit hardest. Despite the beginnings of a rebound next year, Zenith said it expected the United States to show three years of decline in advertising spending, with a full recovery not seen until 2004.
Zenith is forecasting an 8.7 percent slide in U.S. spending in real terms adjusted for inflation this year, or a nominal six percent. Next year, it said U.S. advertising spending would fall 3.5 percent in real terms, or a nominal 1.5 percent.
The figures were less optimistic than Universal McCann's.
Coen told the same conference he expected U.S. national advertising to rise 2.5 percent in 2002 to $145.9 billion, after a 3.9 percent fall this year. U.S. local advertising was seen climbing 2.3 percent after a 4.9 percent fall this year.
Universal McCann's Coen had earlier been forecasting a rise in U.S. advertising spending of 2.5 percent this year, while the rest of the industry was looking at negative figures.
Despite the gloom, Zenith said it had not slashed its forecasts as much as in earlier reviews this year.
"After three big downgrades in a year, our forecasts have stopped growing gloomier," Zenith said in its annual report.
"The terrorist attacks briefly disrupted but did not derail the advertising business," it added. "We expect at least the beginnings of advertising recovery in 2002."
Zenith noted 2002 advertising spending would get a boost from the winter Olympics and the World Cup.
However, Martin Sorrell -- the head of the second biggest advertising group, WPP -- said he had not yet seen any reprieve.
"We have seen nothing yet that indicates there has been a change, a reduction in the rate of downturn. I don't see as many of the rays of sunshine that others have been talking about," he told the UBS conference.
Zenith Optimedia, whose forecasts are closely watched by the industry, said the weakest advertising categories remained dotcoms, telecommunications, financial services and help wanted.
Zenith Optimedia is the world's fourth-largest global media services agency, created from the merger of Zenith Media and Optimedia. It is owned by French advertising group Publicis (PUBP) and UK advertising company Cordiant (CRI).
Universal McCann is a unit of the world's largest advertising company, Interpublic Group of Cos Inc (IPG).
Merissa Marr and Derek Caney, Reuters December 3, 2001
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